Spam and Small Biz: Good News, Mostly

December 29, 2003

By Lisa Miller Gail Goodman, the CEO of marketing-software outfit Roving Software is mighty relieved that Congress finally passed an anti-spam bill. It's not that she thinks the legislation will finally halt spam -- she doesn't. It's that she and her cohorts in the E-mail Service Provider Coalition (ESPC) can finally stop lobbying Congress and return their focus to building what they say is the real spam solution: a formal registry of legitimate marketers, and a screening system that lets service providers boot the bad guys, without also getting rid of student -- loan approvals, subscription e-mail newsletters, college-acceptance letters, and all the other e-mails that recipients actually want to read.

"I'm extremely pleased [with the legislation] from the small business perspective," Goodman says. "The consumer-protection standards could have been stronger, but it makes the egregious practices illegal, and it unifies the patchwork quilt of state laws that were just unmanageable for small business." (See BW Online, 10/30/03, "Needed: A Beefier CAN-SPAM Bill".)

CYBER CREDENTIALS. And what a patchwork it was. By the time Congress got around to tackling the issue, 37 states already had their own laws regulating spam, and most gave individual spam recipients the right to sue the sender. The federal legislation does not include that option, and since it preempts state laws, that's a huge relief for the small businesses using e-mails in their marketing efforts (see BW Online, 11/3/03, "A Spam Law That Slams Small Business").

"The problem with a private right of action is that consumers forget they signed up for lists," Goodman says. "Then, they remember that they're mad about spam, and they go after people they truly did opt in for. The small business then needs to defend itself. It may win, but it's incredibly disruptive, expensive [and] frightening."

With that threat taken care of, the challenge now is to come up with a system that thwarts the real deal: spam sent from unknown, untraceable sources to those who don't want to receive it. ESPC has worked out a blueprint for just such a scheme. Called Project Lumos, it is based on issuing electronic credentials to legitimate high-volume e-mail senders and e-mail service providers (ESPs). As e-mail comes in, the receiving ESP can check for this electronic I.D. and let registered senders' missives go through, while blocking everything else.

NO GUARANTEES. Besides making sure that senders are identifiable and legit, Lumos also includes a mechanism for measuring their reputations. Not as subjective as the E-Bay (EBAY) or Amazon.com (AMZN) seller-rating systems, the Lumos approach is based on a tally of how much mail is sent, how much is opened and read, how many complaints come back, and how many recipients opt out. Attempts to sandbag competitors by signing up to their e-mail lists and then reporting them as spammers, for example, can usually be detected, Goodman says. A dispute-resolution process also is part of the Lumos proposal.

Still, despite the ESPC's hard work on the subject -- including a detailed white paper published in September -- there's no guarantee its Lumos blueprint will be adopted as the industry standard. More likely, says Goodman, the industry will embrace a handful of different systems that use similar approaches to track sender identity and reputation. "There are a variety of proposals out there," Goodman says. "The control over solution-adoption lies in the hands of the large ISPs, because what they endorse will be adopted. And they will likely endorse multiple solutions."

If there is a silver lining to the spam saga, it's that it has forced small businesses to find new ways to apply e-mail as a marketing tool. Casting a broad net to fish for new customers just isn't viable anymore. But employing targeted e-mailings to retain old customers is turning out to be quite effective, and that's bringing a whole new level of sophistication to how small outfits approach marketing.

HARD LESSONS. "This is actually the good side of spam, believe it or not," Goodman says, adding that small businesses are "realizing that if they want to distinguish themselves from the other e-mail in people's inboxes, they have to add value. It's teaching them about brand-building and image-building. Building a customer database and building customer relationships over time have been more Big Business concepts until recently. Small businesses are beginning to take the longer view."

Goodman figures that some sort of registry system will be in place by mid-2004. But the truth is that no matter what happens with spam itself, small business is already far savvier for having encountered it. And that's a benefit that will keep paying dividends, long after the fuss over spam has subsided. Miller covers small-business issues in New York